Opinion
No. 2009 CA 0942.
December 30, 2009.
APPEALED FROM THE NINETEENTH JUDICIAL DISTRICT COURT IN AND FOR THE PARISH OF EAST BATON ROUGE DOCKET NUMBER 547,708, SECTION 27 STATE OF LOUISIANA THE HONORABLE TODD W. HERNANDEZ, JUDGE.
Antonio Charles Ferachi, Frederick Mulhearn, Baton Rouge, Louisiana, Attorneys for Defendant/Appellant Cynthia Bridges, Secretary, Louisiana Department of Revenue.
Christian N. Weiler, Paul Damian Rees, Covington, Louisiana, Attorneys for Plaintiffs/Appellees Medical Diagnostic Services, Inc., Baton Rouge General Medical Center, and Baton Rouge General Health Center, et al.
BEFORE: PARRO, KUHN, AND McDONALD, JJ.
Medical Diagnostic Services, Inc. appealed the Louisiana Department of Revenue's (the Department's) denial of its claim for a refund of sales and use taxes paid during the period of January 1, 1991, through December 31, 1992. Baton Rouge General Medical Center, Baton Rouge General Health Center, and its affiliated and subsidiary entities appealed the Department's denial in part of their claims for refund of sales and use taxes paid during the period of January 1, 1996, through December 31, 1997. The two cases were consolidated for hearing before the Board of Tax Appeals.
After a hearing, the Board of Tax Appeals ruled against the Department, ordering it to refund to Medical Diagnostic Services the amount of $117,833.37 in tax, plus interest, and to refund to Baton Rouge General Medical Center the sum of $130,193.93 in tax, in addition to the amount the Department had already agreed to refund, plus interest. The Board of Tax Appeals found that Medical Diagnostic Services' and the Baton Rouge General Medical Center's (the taxpayers') purchases of X-ray film, reagents, medical laboratory kits and supplies, and other diagnostic devices were exempt from taxation under La.R.S. 47:305 D(1)(j). The Board of Tax Appeals' reasons state that "the diagnosis is a vital part of the 'treatment of any medical disease' as defined by statute. In addition, many of the items that are sought to be exempted serve in both the diagnosis and the healing phase of treatment." The Department thereafter filed a petition for judicial review of the Board of Tax Appeals' ruling in the Nineteenth Judicial District Court.
The Department asserted that the taxes at issue were not paid on the purchase or use of pharmaceuticals or medical devices prescribed by physicians for use in the treatment of medical diseases, and that the Board of Tax Appeals erred by broadly interpreting statutory language which should be strictly construed. The Department prayed that the Board of Tax Appeals' decision be reversed in its favor.
After a review of the matter, the district court ruled in favor of the taxpayers, affirming the ruling of the Board of Tax Appeals. The Department appealed the district court judgment, and further, filed a motion with this court to strike portions of the taxpayers' appellate brief and three of the taxpayers' exhibits in the district court record.
THE DEPARTMENT'S MOTION TO STRIKE
The Department asserts that portions of the taxpayers' brief should be stricken, because they make inaccurate and misleading statements about positions adopted and published by the Department over the past twenty years; and further asserts that the taxpayers' exhibits T-3, T-7, and T-8 should be stricken, because they were allowed into the record without foundation or authentication.
In reference to the statements which the Department wants stricken, it states:
On of the [taxpayers'] brief, the [taxpayers] made prejudicial and erroneous statements against the Department stating: "The law does not exempt only those items which themselves heal or which cause a cure, so called therapeutic items, rather . . . LSA R.S. 47:305(D)(1)(j) exempts from taxation, all medical devices for 'use in the treatment of any medical disease' . . . The Department has itself adopted this position in published guidance for nearly 20 years now." This statement that the Department has adopted and published such a position is erroneous and unsupported from the record and must be stricken from the taxpayers' brief.
On of the [taxpayers'] brief, the [taxpayers] made an additional prejudicial and erroneous statement against the Department stating: "The sole issue appealable by the Department is whether the items are 'used in the treatment'; the new arguments now being raised concerning the definition of a 'device' and the requirement that a prescription pad is required should not be considered. . . . The Department's multiplicity of publications and published guidance over 20 years dispels these new arguments as well." This statement that the Department has adopted such policies in [its] publications for over twenty years that dispel the Department's arguments is erroneous and unsupported from the record and must be stricken from the taxpayers' brief.
Regarding the statements made in the taxpayers' brief which are objected to by the Department, the appellate briefs of parties are not part of the appellate record on appeal, and this court has no authority to consider on appeal facts referred to in appellate briefs, if those facts are not in the record on appeal. J. Ray McDermott, Inc. v. Morrison, 96-2337 (La. App. 1 Cir. 11/7/97), 705 So.2d 195, 201, writs denied, 97-3055, 97-3062 (La. 2/13/98), 709 So.2d 753, 754; La.C.C.P. art. 2164. Thus, we find it is not necessary to strike either the statements in the briefs or the exhibits.
Further, after a review of the record and the briefs, we find that, while it may have been error for the Board of Tax Appeals to admit the letters into evidence, it was harmless error, because these letters were of limited probative value in determining the outcome of the case. These letters, written by the Department to other clients of a CPA who testified at trial on behalf of the taxpayers, merely stated the policy of the Department at that time. The Department was free to change its policies at any time.
The ultimate determination that the items were tax-exempt was determined, first, by whether certain items were used in the treatment of a patient, which hinged upon the testimony by Dr. Shannon Cooper, who testified to the effect that diagnostic work, testing, and test results were all part of the treatment of the patient, and second, by whether the items were prescribed by a physician, which was adduced from the testimony and stipulations of the parties and which showed that all of the items at issue were prescribed by a physician.
THE APPEAL BY THE DEPARTMENT
Louisiana Revised Statutes Title 47 provides for "Revenue and Taxation." Louisiana Revised Statue 47:305D(1) provides:
The sale at retail, the use, the consumption, the distribution, and the storage to be used or consumed in the taxing jurisdiction of the following tangible personal property is hereby specifically exempted from the tax imposed by taxing authorities, except as otherwise provided in this Paragraph:
. . . .
(j) Solely for purposes of the state sales and use tax, drugs prescribed by a physician or dentist.
Louisiana Revised Statute 47:301(20) provides the definition of "[d]rugs" as "includes all pharmaceuticals and medical devices which are prescribed for use in the treatment of any medical disease."
The Board of Tax Appeals found in its reasons the following:
During the original trial, Dr. Edgar Shannon Cooper, M.D., who was qualified as an expert in the field of medicine, and testified, without contradiction, that diagnostic work, testing and test results are all part of the "treatment" of a patient. Additionally, the testimony and stipulations of the parties showed that all of the items at issue were prescribed by a physician.
After carefully considering the testimony, memoranda, stipulations and all evidence submitted and presented at the original hearing and this hearing on remand, it is the ruling of this Board that the diagnosis of an illness or disease, diagnostic work, testing and test results are all a vital part of the treatment of a patient and therefore, exempt and the refunds requested by the taxpayers are allowed.
Additionally, as to the specific classification of the items in question, it is the finding of this Board that the following items were used in the diagnosis of medical illness and diseases, as follows:
(a) blood pressure cuffs;
(b) diabetic test strips;
(c) EKG electrodes; (d)X-Ray film;
(e) microtainer specimen collectors;
(f) vacutainer tubes;
(g) lancets;
(h) transfer pipettes;
(i) centrifuge tubes;
(j) multi-sticks 10 SG; and singles;
(k)all reagents, and reagent strips;
(l) medical lab kits;
(m) 24-hour collection bottles;
(n) blood pressure prep kits;
(o) diabetic lancets and test strips;
(p) disposable tourniquets;
(q) dressings;
(r) medicine spoons;
(s) medicine cups;
(t) midstream urine cups;
(u) specimen collection cups;
(v) specimen collection kits;
(w) tender foot heel lances;
(x) urine culture kits;
(y) urine sample cups;
(z) vacutainers;
(aa) whole blood tubes;
(bb) winged collection sets;
(cc) IV's;
(dd) butterflies;
(ee) labeling tape;
(ff) biohazard collectors;
(gg) feline leukemia test kit (a reagent);
(hh) probes;
(ii) sterile swabs;
(jj) pipettes;
(kk) plates;
(ll) micro dilution broach panel;
(mm) panels;
(nn) stains;
Further, it is the finding of this Board that the following items were used in both diagnosis, healing and treatment of patients;
(a) syringes;
(b) disposable gloves;
(c) latex gloves; (d)lab coats;
(e) masks;
(f) shoe covers;
Further, it is the finding of this Board that the following items were not used in any of the categories;
(a) 72 hole racks;
(b) lamp hoods;
(c) canine heartworm test kit;
* * * *
After a thorough review of the record, we find no error and we affirm the district court judgment. Costs of this appeal in the amount of $2,419.50 are assessed against the Department. This memorandum opinion is rendered in accordance with Uniform Courts of Appeal Rule 2-16.1.B.